1. © 2013 Delmar Cengage Learning
CHAPTER 8
INCORPORATIONS
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2. Preincorporation Matters
DECIDING ON INCORPORATING
Income tax implications
Capital requirements
Applicable statutory requirements
Desired management structure
The importance of limited liability
Transferability of ownership
Ease of forming and dissolving the entity
Business continuity
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3. Preincorporation Matters
CHOOSING A DOMICILE
The incorporators can choose the most advantageous state in which to file the articles or certificate of incorporation and that becomes the state of domicile.
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4. Preincorporation Matters
INCORPORATING IN DELAWARE Delaware has been a very popular state for incorporating due to its liberal corporate laws and user-friendly Division of Corporations.
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5. Preincorporation Matters
The founders of a corporation may enter into a preincorporation agreement to set forth their understanding.
Individuals may enter into stock subscription agreements for the purchase of stock in a corporation once it is formed.
It is important to gather all relevant information from the client before drafting and filing incorporation documents.
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6. Promoters and Incorporators
The formation of certain corporations is facilitated by a promoter.
Brings interested parties together, obtains subscriptions for stock, and handles the incorporation
Actions ratified by the corporation once it is formed
The incorporator usually signs the articles of incorporation.
Minimal role, often ends once the corporation is formed
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7. CORPORATE NAME REQUIREMENTS
Must include words indicating the business is a corporation, such as corporation, incorporated, company, limited, corp., inc., co., or ltd.
Must not be the same as or similar to name already in use in the state of domicile
Must not be a deceptive name
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8. Articles of Incorporation
MANDATORY PROVISIONS
Name of the corporation
Number of shares the corporation is authorized to issue
Street address of the corporation’s initial registered office and the name of its initial registered agent at that office
Name and address of each incorporator
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9. Articles of Incorporation
OPTIONAL PROVISIONS The incorporators may choose to include additional information concerning the governance of the corporation in the articles of incorporation, so long as the provisions are not contrary to law.
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10. Articles of Incorporation
STATUTORY PROVISIONS THAT MAY BE AMENDED IN THE ARTICLES OF INCORPORATION
State statutes generally include several default provisions that will apply to the corporation unless the articles of incorporation provide otherwise.
In some states, there are requirements for publishing a notice of incorporation or recording the articles at the county or local level.
The corporate existence begins when the articles of incorporation are accepted for filing with the proper state authority or at a later date stated in the articles.
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11. Organizational Meeting
ACTIONS TAKEN AT THE ORGANIZATIONAL MEETING
Elect the first board of directors and officers
Adopt bylaws
Ratify the acts of incorporators and promoters
Accept stock subscriptions and issue shares of stock
Approve a form of stock certificate
Reach an agreement on accounting arrangements
Authorize securities filings
Approve S Corporation status (if desired)
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12. Bylaws: Rules and Guidelines for Internal Corporate Control
The corporation’s office address(es)
Procedures for giving notice and holding shareholder meetings
Procedures for giving notice and holding board of director meetings
Guidelines for the board of directors
Guidelines and qualifications for officers
The corporation’s fiscal year
Guidelines for paying dividends
Provisions approving a form of stock certificate
Provisions for amending bylaws
Guidelines for keeping the corporate records
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13. Formation of Special Types of Corporations
There may be additional requirements for incorporating special types of corporations such as:
Statutory close corporations
Professional corporations
Nonprofit corporations
S Corporations
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14. TASKS PERFORMED BY PARALEGALS WORKING ON INCORPORATIONS
The Paralegal’s Role
TASKS PERFORMED BY PARALEGALS WORKING ON INCORPORATIONS
Attend attorney/client meeting to collect information
Check name availability, prepare and file application for name reservation and articles of incorporation
Check for compliance with any publication or county-recording requirements
Draft corporate documents
Assist client with obtaining required licenses
Order and organize corporate minute book, seal and stock certificates; prepare stock certificates and stock ledger
Follow up with client concerning corporate formalities and procedures to be followed
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